Florida tops on home defaults

Thursday

Jan 17, 2013 at 12:01 AM

Going into new year, analysts say issue is a long way from going away

By JOHN HIELSCHER

Foreclosure filings hit a two-year high in Southwest Florida in 2012, dovetailing with a trend that has catapulted the state to No. 1 in the nation for home defaults for the first time since the U.S. housing markets began imploding six years ago.

While market activity throughout 2012 suggests the region is likely well past the peak of the foreclosure crisis that has dragged down prices and stymied recovery, analysts say distressed properties will remain a key concern in 2013 as lenders work through case backlogs.

"Foreclosures are not going anywhere any time soon," said Drew Peterson, a foreclosure specialist with the Re/Max Alliance Group in Sarasota. "We are among the slowest states for processing foreclosures, a main reason why foreclosure numbers will be high for the foreseeable future."

That lender backlog has swelled court filings throughout Florida, even as new cases have spiked in the region, pushing up the percentage of homes where mortgages are delinquent.

A total of 14,033 foreclosure filings were made in Sarasota, Manatee and Charlotte counties last year, a 22.3 percent increase from 2011, according to real estate research firm RealtyTrac Inc. At least some of that activity stems from a federal settlement with lenders that, in turn, spurred the refiling of some cases that had been dismissed.

Foreclosure filings declined in December, to 1,268 in the three-county region. That was down 27.6 percent from the same month a year ago.

But by year end, 2.8 percent of the region's housing units -- one in every 36 -- had been involved in some step in the foreclosure process.

Florida ended 2012 with more than 377,000 open foreclosure cases, said Deerfield Beach real estate analyst Jack McCabe. Another 500,000 homeowners, meanwhile, have not made payments on their mortgages for at least 90 days but have yet to receive a foreclosure notice.

"The banks are now motivated to process and conclude these foreclosures and transactions," McCabe said. "That is why I expect activity is going to pick up quite a bit in 2013 and 2014."

"Our real estate market is not going to get healthy and back to normal until these distressed properties are dealt with," he said.

Some large lenders, forced into government settlements over foreclosure abuses, are helping homeowners avoid foreclosure through mortgage modifications, principal reductions or short sales.

But an estimated 40 percent of Florida homeowners with mortgages remain underwater -- owing more on their house than it is worth -- and many are expected to choose to walk away from their debt and become renters.

"They can't really put them up for sale," McCabe said. "Most people don't want to pay money to sell their home."

On the plus side, an improving economy, dwindling unemployment rates and increasing home values have helped some Southwest Florida residents keep their homes, said Peterson, the Re/Max foreclosure specialist.

The tightening supply and the rising prices of rentals have swayed some homeowners to strive to pay their mortgages rather than default, he said.

The Sunshine State registered the nation's highest foreclosure rate last year, with 3.11 percent of its housing units, or one in every 32, subject to some level of foreclosure filing.

Last year "was the year of the judicial foreclosure, with foreclosure activity increasing from 2011 in 20 of the 26 states that primarily use the judicial process," said Daren Blomquist, vice president at RealtyTrac.

Blomquist said that Florida posted the nation's highest state foreclosure rate "for the first time since the housing crisis began." While the nation may be "comfortably past" the apex of foreclosures, Blomquist said states like Florida could see a spike in 2013.

"We expect to see continued increases in judicial foreclosure states near the beginning of the year as lenders finish catching up with the backlogs," he said.

Florida accounts for the largest share of foreclosure inventory of any state, with 305,766 properties either in some stage of foreclosure or already bank-owned, by RealtyTrac's measure. That is 20 percent of the U.S. total.

The average time to foreclose in Florida was 853 days, the third-longest period in the nation.

Sarasota County recorded 6,405 foreclosure filings last year, up 42 percent from 2011, while Manatee County had 4,654 filings, up nearly 17 percent for the year. Charlotte County had 2,974 filings, flat with 2011, RealtyTrac data showed.

But the levels of filings in all three counties were well below their peak levels from 2008 to 2010.

In December, Sarasota had 660 filings, down 30.5 percent from November but up 7.5 percent from a year before. Manatee had 275, down 45 percent for the month and 59 percent for the year. Charlotte had 333, up 35 percent for the month but down nearly 28 percent from the same month in 2011.

Early-stage foreclosures, known as "lis pendens," totaled 421 across the region during December, down 29 percent from November and 40 percent from December 2011.